Saturday, February 21, 2009

Management Problems - Suing Your HOA

Question: A few years ago my family bought what we thought was our dream home, but now the pool is closed for “safety reasons,” I smell gas when I walk by the gas boiler outside of the laundry room, and the lights no longer work at the tennis courts. On top of this, the dues we pay are excessive, not properly credited, and it is almost impossible to get a straight answer from the management company. Should we sue the board?

Answer:Maintaining the common areas is one of the primary responsibilities of an HOA. The other big responsibility is managing the association’s money. It sounds like your HOA is failing on both these counts. These responsibilities are described in your CC&Rs and By-Laws. When an owner sues to force the board of directors to follow the governing documents it is called an enforcement action. There may also be a cause of action against individual board members for a breach of their fiduciary duties to look after the well-being of the association.

There are several steps that must be taken in California before a homeowner, or a group of homeowners, can sue their HOA. Usually, a homeowner will want to request a meet and confer, an internal dispute resolution process described in Civ. Code § 1363.810 – 1363.850. While optional for the homeowner, the association must participate if requested by a homeowner. The purpose is to provide “a fair, reasonable, and expeditious” way of solving disagreements. An HOA must provide every member annually with a description of the association’s internal dispute resolution process (See Annual Disclosures).

If the problem is not solved internally, either party can request Alternative Dispute Resolution (“ADR”) which is a more formal process conducted by a mediator or arbitrator, who is often a former judge or experienced attorney. California Civil Code § 1369.520(a) states that an association or owner may not file an enforcement action until the parties have submitted their dispute to ADR.

The ADR process is begun by one party serving all other parties a Request for Resolution. This request must include 1) a brief description of the problem, 2) a request for alternative dispute resolution, 3) a notice that the party receiving the Request for Resolution is required to respond within 30 days of receipt or that the request will be deemed rejected, and 4) if the party to receive the request is a homeowner, a copy of Civ. Code § 1369.590 (describing ADR).

If the party who receives the Request for Resolution accepts, then the dispute resolution must be completed within 90 days, unless the process is extended by written agreement of the parties. The costs of ADR are shared by both parties. At the time a lawsuit is filed to enforce the governing documents a certificate must be filed stating that one or more of the following conditions have been met: 1) ADR has been completed, 2) one of the parties did not accept the terms offered for ADR, or 3) preliminary or temporary court involvement is needed to stop some imminent action.

It is better to try and work things out with your board and management company before filing a lawsuit. California law requires that you try to do so. If your board is unwilling to listen, you may want to run for a position on the board or recruit another concerned homeowner. If your management company is the problem, get rid of them. An attorney can help protect your rights.

3 comments:

Per the CC&R's, our association is responsible for paying for air conditioning maintenance and replacement. Our units are 30 years old and most have never been replaced and still have original parts. Since March, 22 requests have been submitted and resubmitted to the HOA for repair; none have been addressed. We recently had an A/C company do an assessment of all the units with complaints. Of the 22, 3 have compressors that are beyond repair. The others have a metal drain pan which has rotted through the years and is now leaking water into the ceilings of the townhomes when the air is turned on and causing water damage, sagging garages, etc., all of which the association is responsible for (again, per our CC&R's). The Association says they do not have enough money to pay for all of the requests, and are also afraid that if they pay for these, then other people will come forward with requests. Some of the homeowners submitted their orignial requests over 2 years ago. The Board did approve addressing the top 2 or 3 units that are causing the most damage. The rest of us have been instructed not to use our air conditioners (and thus avoid the leak). Those of us (like me) who have bad compressors have been told that we're not a priority because not having a compressor is not causing damage. It is averaging 100 degrees here in CA, we have a lot of older residents and pets that are suffering. Additionally, we offered to "loan" the association the money and set up a payment plan with them where they could pay us back. They said no because they did that once and the owner spent too much money. We asked if we could just go forward with the repairs, and they said only at our own risk and would not commit to reimbursement. We don't know what else to do except sue the association. Any recommendations?

Thank you for posting this. The problem with our HOA is that none of the rules are being enforced, which has resulted in lowered property values. There are over a dozen owners trying to sell their homes - a tricky feat when prospective buyers see knocked over trash cans, peeling paint, cars parked illegally, and weeds growing everywhere! Our neighborhood is a mess.

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I represent clients in both consumer and small business bankruptcy matters - Chapters 7, 13, an 11. I graduated from Concord Law School and passed the California Bar Exam on my first attempt in 2008. My office is in the French Marketplace on Santa Monica Boulevard in West Hollywood, but I frequently travel to meet clients in San Diego and Riverside. 2010 was a very busy year. I have received positive comments on my previous blog entries and I am looking forward to starting up again soon.